UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of October 15, 2024, the registrant had
Table of Contents
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PART I. |
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Item 1. |
1 |
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1 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
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3 |
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4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 |
Item 3. |
45 |
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Item 4. |
45 |
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PART II. |
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Item 1. |
47 |
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Item 1A. |
47 |
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Item 2. |
48 |
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Item 3. |
48 |
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Item 4. |
48 |
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Item 5. |
48 |
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Item 6. |
48 |
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50 |
Unless the context indicates otherwise, references in this quarterly report to the “Company,” “Celularity,” “we,” “us,” “our” and similar terms refer to Celularity Inc. and its consolidated subsidiaries.
The Celularity logo, Celularity IMPACT, Biovance, Interfyl, Lifebank, CentaFlex and other trademarks or service marks of Celularity Inc. appearing in this quarterly report are the property of Celularity Inc. This quarterly report on Form 10-Q also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing herein are the property of their respective holders
On February 28, 2024, we effected a 1-for-10 reverse stock split of our outstanding shares of Class A common stock. Unless specifically provided otherwise herein, all share and per share information in this quarterly report on Form 10-Q has been adjusted to reflect the reverse stock split.
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this quarterly report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations," constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements relate to our future events, including our anticipated operations, research, development and commercialization activities, clinical trials, operating results and financial condition. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, express or implied statements about:
These forward-looking statements are based on information available as of the date of this quarterly report, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Some factors that could cause actual results to differ include:
ii
For a further discussion of these and other factors that could cause our future results, performance or transactions to differ significantly from those expressed in any forward-looking statement, please see the section titled “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission on July 30, 2024, or the "2023 Form 10-K." Given these risks, you should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or
iii
to third parties making the forward-looking statements). While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Except to the extent required by applicable law, we are under no obligation (and expressly disclaim any such obligation) to update or revise their forward-looking statements whether as a result of new information, future events, or otherwise.
iv
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Celularity Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
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March 31, |
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December 31, |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance of $ |
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Notes receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Right-of-use assets - operating leases |
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Restricted cash |
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Inventory, net of current portion |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Accrued R&D software |
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Short-term debt - unaffiliated (includes debt measured at fair value of $ |
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Short-term debt - related parties |
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Deferred revenue |
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Total current liabilities |
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Deferred revenue, net of current portion |
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Acquisition-related contingent consideration |
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Noncurrent lease liabilities - operating |
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Warrant liabilities |
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Deferred income tax liabilities |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock, $ |
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Common Stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Celularity Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(In thousands, except share and per share amounts)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Net revenues |
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Product sales |
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$ |
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$ |
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Services |
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License, royalty and other |
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Total revenues |
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Operating expenses |
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Cost of revenues (excluding amortization of acquired intangible assets) |
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Product sales |
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Services |
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License, royalty and other |
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Research and development |
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Software cease-use costs |
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Selling, general and administrative |
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Change in fair value of contingent consideration liability |
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( |
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Goodwill impairment |
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Amortization of acquired intangible assets |
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Total operating expenses |
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Loss from operations |
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( |
) |
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( |
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Other income (expense): |
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Interest income |
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Interest expense |
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( |
) |
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( |
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Change in fair value of warrant liabilities |
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( |
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Change in fair value of debt |
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( |
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Loss on debt extinguishment |
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( |
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Other expense, net |
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( |
) |
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( |
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Total other expense |
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( |
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( |
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Loss before income taxes |
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( |
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( |
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Income tax expense (benefit) |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Change in fair value of debt due to change in credit risk, net of tax |
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Other comprehensive income |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
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Share information: |
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Net loss per share - basic and diluted |
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$ |
( |
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$ |
( |
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Weighted average shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Celularity Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(In thousands, except share amounts)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated Other Comprehensive |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balances at January 1, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
- |
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$ |
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Issuance of common stock to Yorkville for debt extension and SEPA commitment fee |
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- |
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- |
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- |
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Issuance and modification of warrants to RWI and C.V. Starr |
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- |
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- |
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- |
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- |
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Issuance of common stock and warrants in PIPE Offering, net of offering expenses |
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- |
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- |
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Vesting of restricted stock units |
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- |
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- |
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- |
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- |
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Tax withholding on vesting of restricted stock units |
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( |
) |
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- |
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( |
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- |
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- |
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( |
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Issuance of common stock to Palantir as consideration for settlement agreement |
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- |
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- |
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- |
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Retirement of shares in connection with reverse stock split |
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( |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
Balances at March 31, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
- |
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$ |
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Balances at January 1, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Exercise of stock options |
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- |
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- |
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- |
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Common stock issued pursuant to short-term debt conversion |
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- |
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- |
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( |
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Issuance of common stock in PIPE Offering, net of offering expenses |
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- |
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- |
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- |
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Issuance of common stock for stem-cells to be used in research and development |
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- |
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- |
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- |
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Vesting of restricted stock units |
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- |
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- |
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- |
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- |
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- |
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Tax withholding on vesting of restricted stock units |
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( |
) |
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- |
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( |
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- |
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- |
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( |
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Issuance of common stock under ATM Agreement |
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- |
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- |
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- |
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Issuance of warrants on senior secured bridge loan |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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Change in fair value of debt due to change in credit risk, net of tax |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
Balances at March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Celularity Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Cash flow from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operations: |
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Depreciation and amortization |
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Non cash lease expense |
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( |
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Provision for doubtful accounts |
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Provision for inventory obsolescence |
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( |
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- |
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Change in fair value of warrant liabilities |
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( |
) |
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Goodwill impairment |
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- |
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Stock-based compensation expense |
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Change in fair value of contingent consideration |
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- |
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( |
) |
Acquired in-process research and development |
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- |
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Issuance of common stock for stem-cells to be used in research and development |
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- |
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Issuance of common stock to Palantir as consideration for settlement agreement |
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- |
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Issuance of common stock relating to Yorkville for debt extension and SEPA commitment fee |
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- |
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Change in fair value of contingent stock consideration |
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- |
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( |
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Loss on extinguishment of debt |
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- |
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Change in fair value of debt |
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( |
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Non cash interest expense |
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- |
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Other, net |
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Changes in assets and liabilities: |
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- |
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Accounts receivable |
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( |
) |
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Inventory |
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( |
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Prepaid expenses and other assets |
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Accounts payable |
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( |
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Accrued expenses and other liabilities |
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Accrued R&D software |
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( |
) |
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Lease liabilities - operating |
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Deferred revenue |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flow from investing activities: |
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Capital expenditures |
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( |
) |
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( |
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Purchase of acquired in-process research and development |
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- |
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( |
) |
Net cash used in investing activities |
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( |
) |
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( |
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Cash flow from financing activities: |
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Proceeds from warrants and short-term debt - related parties |
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Proceeds from the exercise of stock options |
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- |
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Repayments of short-term debt - unaffiliated |
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( |
) |
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( |
) |
Proceeds from issuance of short-term debt - unaffiliated |
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- |
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Payment of SEPA commitment fee |
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( |
) |
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- |
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Repayments of short-term debt - related parties |
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( |
) |
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- |
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Proceeds from PIPE Offering, net of offering costs |
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Proceeds from the sale of common stock in ATM offering |
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- |
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Tax withholding on vesting of restricted stock units |
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( |
) |
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( |
) |
Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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( |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
- |
|
|
$ |
|
|
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
||
Property and equipment included in accounts payable and accrued expenses |
|
$ |
( |
) |
|
$ |
( |
) |
Modification of C.V. Starr warrants in connection with forbearance |
|
$ |
|
|
$ |
- |
|
|
Issuance of RWI warrants in connection with forbearance |
|
$ |
|
|
$ |
- |
|
|
Issuance of warrants on senior secured bridge loan |
|
$ |
- |
|
|
$ |
|
|
PIPE related offering costs included in accrued expenses |
|
$ |
- |
|
|
$ |
( |
) |
Common stock issued for short-term debt conversion |
|
$ |
- |
|
|
$ |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Celularity Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
Celularity Inc., ("Celularity” or the "Company”), formerly known as GX Acquisition Corp. ("GX”), was a blank check company incorporated in Delaware on
On July 16, 2021 (the "Closing Date”), the Company consummated the previously announced merger pursuant to the Merger Agreement and Plan of Reorganization, dated January 8, 2021 (the "Merger Agreement”), by and among GX, Alpha First Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of GX ("First Merger Sub”), Celularity LLC (f/k/a Alpha Second Merger Sub LLC), a Delaware limited liability company and a direct, wholly owned subsidiary of GX ("Second Merger Sub”), and the entity formerly known as Celularity Inc., incorporated under the laws of the state of Delaware on August 29, 2016 ("Legacy Celularity”). Upon completion of the merger transaction, GX changed its name to Celularity Inc.
At the special meeting held on February 22, 2024, the stockholders of Celularity approved an amendment to Celularity’s Second Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of Celularity’s Class A common stock, par value $
Description of Business
Celularity is a cell therapy and regenerative medicine company focused on addressing aging related diseases including cancer and degenerative diseases. Celularity develops and markets off-the-shelf placental-derived allogeneic advanced biomaterial products including allografts and connective tissue matrices for soft tissue repair and reconstructive procedures in the treatment of degenerative disorders and diseases including those associated with aging. Celularity is developing a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor ("CAR"), natural killer ("NK") cells, and mesenchymal-like adherent stromal cells ("MLASCs") and exosomes. These therapeutic candidates may potentially target indications across cancer, infectious and degenerative diseases. Celularity believes that by harnessing the placenta’s unique biology and ready availability, it will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. Celularity's biomaterials business today is comprised primarily of the sale of its Biovance 3L products, directly or through its distribution network. Biovance 3L is a tri-layer decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Celularity is developing new placental biomaterial products to deepen the commercial pipeline. The Company also plans to leverage its core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties. The initial focus of this new service offering will be to assist development stage cell therapy companies with the development and manufacturing of their therapeutic candidates for clinical trials.
Celularity is headquartered in Florham Park, NJ. Legacy Celularity acquired Anthrogenesis Corporation ("Anthrogenesis”) in August 2017 from Celgene Corporation ("Celgene”), a global biotechnology company that merged with Bristol Myers Squibb Company. Previously, Anthrogenesis operated as Celgene Cellular Therapeutics, Celgene’s cell therapy division.
The Celularity IMPACT (IMmunomodulatoryPlacenta-derivedAllogeneicCellular therapy) platform capitalizes on the benefits of placenta-derived cells to target multiple diseases, and provides seamless integration, from bio sourcing through manufacturing cryopreserved and packaged allogeneic cells at its purpose-built U.S.-based
From a single source material, the postpartum human placenta, the Company derives four allogeneic cell or extracellular vesicle types: T cells, NK cells, MLASCs and exosomes, which have the potential to support multiple therapeutic programs. In 2022, the Company had active and approved clinical trials under development utilizing CYNK-001, a placental derived unmodified NK cell, for the treatment of acute myeloid leukemia, or AML, a blood cancer, and for glioblastoma multiforme, or GBM, a solid tumor cancer. The Company also had an active clinical trial utilizing CYNK-101, a genetically modified NK cell, for the treatment of HER2+ Gastric cancer. Due to a need to prioritize corporate resources, in January 2023 the Company announced its intention to cease recruitment in the GBM and the HER2+ gastric trials. In addition, in April 2023, the Company announced based on the preliminary results of the phase 1 trial data of CYNK-001, the AML trial would be closed to further enrollment and has completed follow up. The Company is currently
5
not actively investigating CYNK-001 for any indication. During the second quarter of 2023, the Company fully impaired the in-process research and development ("IPR&D") assets associated with CYNK-001. In the first quarter of 2022, the Company submitted an IND to investigate CYCART-19, a placental-derived CAR-T cell therapy targeting the cluster of differentiation 19, for the treatment of B-cell malignancies. In late May 2022, the Company received formal written communication from the U.S. Food and Drug Administration requesting additional information before it can proceed with the planned Phase 1/2 clinical trial. After assessing the status of the IND to determine an optional path forward for the CYCART-19 program, the Company elected to terminate development of CYCART-19 for B-cell malignancies during the third quarter of 2023. The Company may continue pre-clinical development of other T-cell candidates. APPL-001 is a placenta-derived MLASC being developed for the treatment of Crohn’s disease, and other degenerative diseases. Due to an internal alignment of corporate resources, the Company has paused development in exosomes to focus on other priorities.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental regulations and the ability to secure additional capital to fund operations. Drug candidates currently under development will require significant additional approval prior to commercialization, including extensive preclinical and clinical testing and regulatory approval. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Going Concern
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.
As an emerging clinical-stage biotechnology company, Celularity is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted to making investments in research and development including basic scientific research into placentally-derived allogeneic cells, pre-clinical studies to support its current and future clinical programs in cellular therapeutics, and clinical development of its cell programs as well as facilities and selling, general and administrative expenses that support its core business operations (collectively, the "investments”), all at the expense of the Company’s short-term profitability. The Company has historically funded these investments through limited revenues generated from its biobanking and degenerative disease businesses and issuances of equity and debt securities to public and private investors (these issuances are collectively referred to as "outside capital”). Notwithstanding these efforts, management can provide no assurance that the Company’s research and development and commercialization efforts will be successfully completed, or that adequate protection of the Company’s intellectual property will be adequately maintained. Even if these efforts are successful, it is uncertain when, if ever, the Company will generate significant sales or operate in a profitable manner to sustain the Company’s operations without needing to continue to rely on outside capital. Continued decline in the Company’s share price could result in impairment of goodwill or long-lived assets in a future period.
As of the date the accompanying condensed consolidated financial statements were issued, or the issuance date, management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40:
6
These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The unaudited condensed consolidated financial statements include the accounts of wholly owned subsidiaries, after elimination of intercompany accounts and transactions. The unaudited condensed consolidated financial information presented herein reflects all financial information that, in the opinion of management, is necessary for a fair statement of consolidated financial position, results of operations and cash flows for the periods presented.
The Company’s condensed consolidated financial statements are prepared in accordance with the U.S. Securities and Exchange Commission’s ("SEC") rules for the presentation of interim financial statements, which permit certain disclosures to be condensed or omitted. These financial statements should be read in conjunction with the Company’s annual financial statements as of and for the year ended December 31, 2023.
In the opinion of management, the accompanying interim financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s consolidated financial position as of March 31, 2024, and its consolidated results of operations and cash flows for the three months ended March 31, 2024 and 2023. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2023 included in the Annual Report on Form 10-K filed with the SEC on July 30, 2024, (the “2023 Form 10-K”).
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, assumptions related to the Company’s goodwill and intangible asset impairment assessments, the valuation of inventory, contingent consideration, short-term debt, determination of incremental borrowing rates, accrual of research and development expenses, and the valuations of stock options and stock warrants. The Company based its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
7
Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
Comprehensive Income (Loss)
Comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to accumulated other comprehensive income (loss). The Company’s only component of other comprehensive income (loss) is comprised of the portion of the total change in fair value of indebtedness accounted for under the fair value option that is attributable to changes in instrument-specific credit risk. During the three months ended March 31, 2024, the Company did not have a component of other comprehensive income (loss). During the three months ended March 31, 2023, the Company recorded instrument-specific credit risk income of $
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the condensed consolidated financial statements or in the Company's tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. No income tax expense was incurred during the three months ended March 31, 2024 and 2023.
Net Income (Loss) per Share
Basic net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted net income (loss) per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as redeemable convertible preferred stock, convertible debt, stock options, restricted stock units and warrants, which would result in the issuance of incremental shares of common stock. However, potential common shares are excluded if their effect is anti-dilutive. For diluted net loss per share in the three months ended March 31, 2024 and 2023 when the Company had a net loss, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of Class A common stock outstanding, prior to the use of the two-class method, as they would be anti-dilutive:
|
|
For the Three Months Ended March 31, |
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|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Convertible debt |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
8
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources in assessing performance. The Company manages its operations through an evaluation of
Allowance for Credit Losses and Concentrations of Credit Risk
With the adoption of ASU 2016-13 Financial Instruments — Credit Losses, as noted below, the Company recognizes credit losses based on a forward-looking current expected credit losses. The Company makes estimates of expected credit losses based upon its assessment of various factors, including historical collection experience, the age of accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and restricted cash and accounts receivable. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents or restricted cash and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company is subject to credit risk from trade accounts receivable related to both degenerative disease product sales and biobanking services. All trade accounts receivables are a result from product sales and services performed in the United States. As of March 31, 2024, three of the Company's customers, each of which individually comprised at least
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which expires December 31, 2026 unless the Company is otherwise disqualified. Accordingly, when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Reclassifications
Certain prior period amounts have been reclassified to conform with current year presentation. On the condensed consolidated balance sheets, short-term debt - Yorkville and other short-term debt were reclassified to short-term debt - unaffiliated, and short-term debt - related party and short-term debt - related parties - C.V. Starr and RWI were reclassified to short-term debt - related parties. See Note 7 for further information.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (“ASU 2016-13”), which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. ASU 2016-13 also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual periods beginning after December 15, 2022 (fiscal year 2023 for the Company), and interim periods within those periods, with early adoption permitted. The Company
9
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:
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|
Fair Value Measurements as of March 31, 2024 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets: |
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||||
Convertible note receivable |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
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|
|
|
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Liabilities: |
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|
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|
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|
|
|
||||
Acquisition-related contingent consideration obligations |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Contingent stock consideration |
|
|
— |
|
|
|
— |
|
|
|
|
|
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|
||
Short-term debt - Yorkville convertible note |
|
|
— |
|
|
|
— |
|
|
|
|
|
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||
Warrant liability - July 2023 Registered Direct Warrants |
|
|
— |
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|
|
— |
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|
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||
Warrant liability - April 2023 Registered Direct Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
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||
Warrant liability - May 2022 PIPE Warrants |
|
|
— |
|
|
|
— |
|
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